Canadian banking ombudsman needs teeth: Report

Canadian banking ombudsman needs teeth: Report

The Ombudsman for Banking Services and Investments has come under fire in an independent report for its inability to enforce its own compensation recommendations.

The 84-page report compiled by Deborah Battell, former New Zealand Ombudsman, calls for greater autonomy for OBSI, as one in five compensation cases fall short – or are publicly refused to be paid altogether.

“Publicizing refusals has served to reinforce OBSI’s limitations and undermine public confidence in both the resolution system and the investment market,” the report states. “This is a shame as OBSI has been effective for 82 per cent of complainants who have been assessed as requiring compensation.”

Ken Kivenko, chair of the SIPA Advisory Committee at the Small Investor Protection Association, says the report highlights how far behind the global standard Canada has fallen. “Well I think this is to align us with the rest of the world,” he says. “For instance, New Zealand and Australia have had this for years - so all we’re doing is catching up.”

He adds that access to an effective ombudsman is crucial for investors – and particularly seniors – as Canada’s legal system is ill-equipped to handle smaller individual claims.

“Without this ability, with the legal system in Canada, some would say you need a $200,000 - $500,000 case to even bother going to court,” says Kivenko, “So if you don’t have another vehicle, like an ombudsman, you’re basically stuck.”

The report’s findings were presented to the OBSI’s board of directors as well as the Joint Regulators Committee, which includes representatives from the Canadian Securities Administrators (CSA), the Investment Industry Regulatory Organization of Canada, and the Mutual Fund Dealers Association of Canada.

“She’s written it in such a way that if the Canadian securities administrators of the industry don’t do it, they would have to show cause,” says Kivenko. “They’d really have to explain why we’d want to be less than the rest of the world, and why Canadians don’t need or deserve a better independent dispute handlings system.”

The report’s key conclusions include:

OBSI meets the requirements of the Memorandum of Understanding with the CSA and has performed well within its current mandate: its decisions are fair and consistent with those made internationally; and with its loss calculation tools, its ability to determine fair amounts of compensation is world leading.

OBSI has made exceptional progress since the previous independent review – the main improvements have been in governance, obtaining regulators’ confidence to expand its mandate, and eliminating the backlog of complaints.

OBSI is unlike other comparable international financial sector ombudsmen in that it does not have the authority to bind firms to comply with its compensation recommendations. This drives its operating model and prevents it from fulfilling the fundamental role of an ombudsman, securing redress for all consumers who have been wronged.

OBSI should be enabled to secure redress for consumers.

OBSI should adopt a strategic approach to ombudsmanship, incentivizing staff to use the intelligence gained from cases to help avoid and reduce the incidence of complaints.

I am glad that OBSI has done an analysis of the 2016 public consultation input. I have a great deal of admiration for their releasing the submissions the day after submissions closed in February, 2016. I come to a diametrically different conclusion, however.

Instead of seeing "exception progress" [since the 2013 review] I see a pattern of lawlessness and contempt for rule of law. Since the last review, in my dad's experience, evidence has been released that Canaccord Capital was convicted of failing to supervise its Kelowna and Montreal offices. My dad had submitted a fully documented complaint about the two breach of contract experience he had with this firm back in 2007 - and the regulatory system had precisely zero interest in seeing rule of law adhered to. My dad has had his retirement derailed because of having to battle the bad faith and the limitations of SRO regulators and the inadequacy of mechanisms available in the courts. Provincial Court can not provide awards for court costs - which in my dad's experience in his gaining two convictions for breach of contract against Canaccord came to over $51,000. My dad and I are adamant that the fact that Canaccord was convicted of failing to supervise their Kelowna office should make restitution for its forcing people to have to get a genuine hearing from the justice system - the negligent company should pay for the expenses to the client for this kind of added costs to the client.

Ombuds services are not appropriate in the case of clients having to battle companies that use predatory and deceptive business practices that violate common law and criminal code prohibitions. The fact that Supreme Court of BC case law - as we found in a subsequent case with a different company - provides award to the successful plaintiff of $3000-$7500 for hijacking a client's savings for a 7 year lock-in to a volatile seg fund when the company was peddling counterfeit contracts for selling GICs. The awards for court costs in BC amount to 40-60% of the clients' court and lawyer bills. This brutal fact demonstrates that use of courts is structurally uneconomic to the aggrieved client.

It is high time that OBSI join a national campaign to get every Canadian aware of the history of Canada's commitment to the principle of economic self determination - and to understand that deceptive dealing interferes with the right of vulnerable seniors to have their economic security and rights honoured. Canada needs a mass education drive to create awareness of the Covenant on Economic Social and Cultural Rights - which parliament ratified in 1976.